Profiles in Tax Cuts: Presidents in Tough Times

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The Economic Recovery Act of 1981 reduced taxes for all incomes; tax rates fell from 70 percent to 50 percent for top earners, and rates for low-income earners went from 14 percent to 11 percent.

Reagan's second tax act in 1986 made history for being the first in the history of U.S. income tax to simultaneously reduce the top income rate while increasing the bottom rate; the rich got richer, and the poor got pinched. While the top tax rate was nearly halved, from 50 percent to 28 percent, the bottom rate increased from 11 percent to 15 percent, after a consolidation of tax brackets reduced 15 levels of income to just four. The ultimate result: the upper income level of that bottom tax bracket increased more than five-fold, ballooning from $5,720/year to $29,750/year.

The 1986 act also created just two income tax brackets – those who earned less than $29,750 were taxed 15 percent, and those who earned more were taxed 28 percent.

Not That Big

The Bush tax cuts of 2001 came with a $1.25 trillion price tag. The 10-year deal lowered marginal tax rates for nearly all American taxpayers. For the country's lowest earners, Bush introduced a new 10 percent tax rate for annual joint incomes under $12,000. Top earners saw a decrease of almost 5 percentage points, which is not that much when compared with the tax cuts of his predecessors.

"Look what Bush did, he brought the top tax rate from 39.6 percent to 35 percent," said Mitchell, of the Cato Institute. "That's trivial compared to what Reagan did and what Kennedy did."

Permanent is a 'Term of Art in Washington'

Similarly, the Bush tax cuts' place in history is muted relative to the legislative reform ushered in during the 1960s and 1980s. Kennedy and Reagan's acts were pushed through as permanent legislation (though permanent, as one economist put it, "is a term of art in Washington"). Bush's tax cuts of 2001 and 2003 were reconciliations; they were designed to expire after a certain number of years – hence the recent political clashes over extending the cuts. However, the debate, as Vaird, of the American Economic Institute emphasized, is for the top 2 percent of the population – the high-income earners.

"Let's keep in mind there seems to be broad support, for good or ill, to make these cuts permanent for 98 percent of the population," said Viard.

If that is the case, Bush's cuts, and Obama's hand in extending them or even making them permanent, will likely be one for the history books.

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